NH housing market trending upward in sales

Tim Russell in the living room of his Manchester condo which was appraised for way less than what he and his wife, Rachel, paid for it in 2007. (DAVID LANE/UNION LEADER)

A steady thaw in the housing market began in 2012, with every indication that 2013 could be the beginning of a full-scale real estate recovery in New Hampshire and across the country.

It will still be several years before prices return to pre-recession levels, experts warn, but for the first time since 2006, sales trends are headed in the right direction.

The New Hampshire residential real estate market ended 2012 with the most unit sales since 2006 and the highest sales volume in dollars since 2007. The last five months of the year saw a trend toward improving median price, according to data released on Tuesday by the New Hampshire Association of Realtors.

The median sales price by the end of the year was $202,000, essentially unchanged from $201,700 in 2011. But according to Dave Cummings, NHAR director of communications, prices have been moving in a positive direction since the middle of last year.

"The trend in 2011 for the first six or seven months in prices was down, down, down," he said. "But in the last part of the year the trend is showing month-to-month increases in price." The median sales price at the end of 2010 was $215,000.

The sales increase in New Hampshire has been dramatic, with 12,961 single family residential properties sold in 2012, compared to 10,714 in 2011, a 21-percent increase. The number of foreclosure sales in the state has remained stubbornly high, between 3,300 and 3,500 every year since 2008, according to the New Hampshire Housing Finance Authority, but distressed sales are shrinking as a percentage of the overall sales numbers.

With many property owners unable to sell due to negative equity, very little new construction in the past five years and an increase in sales activity, the inventory of properties available to qualified buyers who want to take advantage of historically low interest rates is rapidly declining.

"When you begin to see that sort of consistent upward movement in sales, in a healthy market you would expect that to lead to a decrease in inventory and ultimately an increase in price, and that's just what we've seen," said NHAR President Bill Weidacher, managing broker at Keller Williams Metropolitan Realty in Bedford. "Even so, we don't want to give the impression that we are expecting dramatic price gains any time soon. Slow and steady are the watchwords."

Compared to the national averages for the year, New Hampshire is beating the nation when it comes to increases in sales, but lags behind in prices.

New Hampshire's 21-percent increase in sales compares to a national average of 6 percent, according to the year-end analysis of housing by CoreLogic. The CoreLogic Home Price Index, based on repeat sales, increased by 6.3 percent in 2012, the largest increase since 2006, while New Hampshire prices remained flat.

Foreclosure numbers are consistent in New Hampshire, but they are declining nationally, with distressed sales down 35 percent in 2012 from the previous year.

Trade-up buyers are stuck

Aside from limited inventory, conditions couldn't be better for first-time buyers with good jobs and good credit. But they make up a relatively small portion of the market. Analysts say trade-up buyers will need to enter the market in greater numbers before we see significant gains in prices.

"Many trade-up borrowers have been locked out of the market because their outstanding loan balance is greater than the market value of their home," according to the CoreLogic report. "Current owners need to sell at prices high enough to extinguish their debt and provide equity for the next home purchase."

Small appreciation in prices is expected to help some of those trade-up buyers, but for people like Tim and Rachel Russell, prices can't rise fast enough. The young couple saved up their first down payment and bought a townhouse in a newly built eight-unit co-op at the site of a former apartment complex on Silver Street in Manchester.

They paid $169,000 for the attractive three-level condo with a garage and deck in January 2007, hoping to eventually sell or rent the property so they could begin to build their family. Now, it is six years later and they feel stuck - victims of a housing collapse they did not create, and frustrated by the fact that programs exist to help everyone except people who have played by the rules.

With one foreclosure and two bankruptcies in their building, identical units are selling for $103,000 to $97,000. The couple can't refinance to take advantage of lower rates, given their outstanding principal balance of $140,000, and the bank won't accept a short sale, since they are not in arrears on their payments. They can't rent the unit and move, because mortgage lenders, once satisfied with a signed lease, now require two years of rental history to accept rental income.

The irony, says Tim Russell, is that if he and his wife were willing to wreck their credit and further destabilize the housing market by going into foreclosure, then they would get some help.

"I called the bank and said, 'I'm in a situation where I could either get refinanced or they could foreclose, which would you rather do?' " he said. "I got transferred to nine people in an hour and a half on the phone, and no one would answer that question."

Until people like the Russells can move, improvement in prices may be incremental at best. But incremental growth is better than none at all.

"After seven years of navigating an unprecedented market downturn, we finally saw stabilization and recovery in 2012," said Stuart Miller, chief executive officer of Lennar Corp., a large homebuilder, during a Jan. 15 earnings call with Bloomberg news service.

"While there have been and still are economic and political uncertainties ahead, we feel that this housing recovery is fundamentally based and driven by a long-term demographic need for housing. We believe 2012 is just the beginning."

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